- 13 Jan 2023
- Precious Metals
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Traditional assets, such as equities, mutual funds, bonds and exchange-traded funds (ETFs), are commonplace in most investor portfolios. But if you're looking to diversify your portfolio, consider alternative options. Investments in precious metals like platinum and gold can provide diversification and inflation protection for their owners. Each has pros and cons, making them more or less appealing to certain investors.
Platinum and gold have a long history of use as investment assets. However, their appeal has grown significantly over time as investors have become more sophisticated in the financial markets. For many, precious metal is an intriguing alternative to traditional investments such as stocks or bonds. Although their appreciation potential and economic value have diminished over time, precious metals still have plenty of appeal as alternative investments.
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Investing In Gold vs Platinum
Investing in Gold
Gold is the most sought-after precious metal on the market. Investors of all sizes purchase gold to diversify their holdings in the face of economic uncertainty and the potential collapse of the S&P 500. Gold is durable, malleable and an effective inflation hedge. Jewelry, coins, bars, bullion, derivatives, futures contracts and gold ETFs are all common ways to invest in precious metals (ETFs).
Gold prices rise when investors flee to safety in them during times of economic uncertainty. Even if it can be used to stave off inflation, it has little room for expansion. No matter how many years or decades pass, a 10-gram gold coin will always be a 10-gram gold coin.
The jewelry industry accounts for over half of the global demand for gold. The usage of this yellow metal is widespread in the medical, technological and aerospace industries. Central banks retain gold as part of their official reserves because of its value as a reserve asset.
Gold's price is not influenced by market forces like supply and demand but rather by the sentiments of individuals who hoard it. When the economy is doing well, investors are willing to sell gold to purchase other assets, such as stocks and bonds, which drives down the price of gold. In times of economic unpredictability, they panic and buy gold, pushing up prices.
The value of gold rises in times of high inflation. Due to conflicts and geopolitical issues, investors are flocking to the yellow metal.
Investing in Platinum
In terms of its actual value, platinum is the rarest and most valuable precious metal. The brilliant white gold is a potent symbol of affluence and achievement. Unlike gold, which is abundant, platinum is highly scarce. Investing in platinum has a shorter history than gold, which has been used for commerce since ancient civilizations.
In contrast to gold, platinum is easily shaped. Several different commercial applications exist for it. Catalytic converters, which reduce pollutants from cars, buses and trucks, rely heavily on platinum. It's used in turbine engines, medical equipment, computers and the oil industry.
Platinum is often exclusively mined in South Africa and Russia, while gold is extracted from dozens of countries worldwide. Platinum prices may be significantly affected by political or economic instability in some nations. The two nations might also work together to boost platinum prices artificially.
Platinum, in contrast to gold, may be used for a wider variety of commercial purposes. Consequently, it’s worth is established by market forces of supply and demand rather than by the whims of investors. It shares the same characteristics as other metals used in industry, such as silver and aluminum.
Platinum's worth reflects the economy as a whole. Platinum's industrial use increases when the economy and the political climate become more stable. The price range is relatively wide. The demand for autos, turbine engines and heavy machinery decrease when the economy weakens. This is causing a drop in platinum's price.
Platinum Vs. Gold: Price and Liquidity
Gold and platinum prices are highly correlated over extended periods. However, different precious metals are affected in their unique ways. Platinum's worth is determined by market forces like supply and demand, whereas gold's is greatly affected by investors' moods.
Gold's safe-haven appeal drives its price upward when the economy is in flux. And platinum prices decline due to diminishing demand. In times of continued economic expansion, the opposite is true.
From 1987 until September 2008, platinum consistently outperformed gold in market value. Before 2011, the platinum price per ounce was higher than the gold price per ounce.
In 2020, an ounce of gold was worth $1,568.40, while one platinum is worth $986.31. Platinum's price is sensitive to shifts in supply and demand in the current economic climate. U.S.-Chinese trade tensions and sluggish global economic growth have pushed gold prices upward.
As of January 2022, APMEX reports that the cost of an ounce of gold is approximately $1,801.30, while that of platinum is around $976.20.
Consider the price difference between gold and silver as an example of an inter-commodity spread. Gold can trade at a premium to platinum at times, while white metal can fetch a premium at other times.
The gold-platinum ratio clarifies their connection and provides insight into the market's mood. If the ratio is more than 1, platinum is less expensive than gold, and if it is less than 1, gold is more affordable than platinum. These metals are considered liquid because they can be converted to currency quickly and readily. But because of the daily global trade volume, gold is the more liquid commodity.
Is Platinum More Precious Than Gold?
When the gold-to-platinum ratio begins to diverge, investors should look to capitalize (the price of gold divided by the price of platinum). The ratio is often lower than 1, indicating that platinum costs more than gold. However, the current ratio is close to 1.6, making platinum more affordable.
Although both are considered valuable metals, gold and platinum are affected by different variables. And that's where platinum starts to lose its dependability. The price of gold is not determined by the underlying supply and demand but rather by the emotions of traders. Much less so than platinum, in fact.
Platinum is produced in only two countries: South Africa and Russia. Platinum prices across the world will be affected by events in these two nations. After platinum mines in South Africa experienced power outages in March 2008, the price of the precious metal surged to a record $2,252 per ounce. In November of 2008, it dropped down to $774. Platinum costs could fluctuate if the automobile market experiences instability.
Ever before have we seen gold prices fluctuate so wildly? China, the United States, Australia, India, Canada and dozens of other nations are all major producers of gold. A challenge with supply in one country is expected to have a minor effect on global prices.
Despite their ongoing argument, gold is still more trusted than platinum as a haven investment. However, the price of gold increased by 18.9% this year. Investors might consider platinum and other precious metals as alternatives due to their relative pricing.
Why Choose Gold Over Platinum?
Platinum is not a safer bet than gold. Gold's price is less volatile than platinum's, and it's also easier to come by than the latter. The value of gold dramatically exceeds that of platinum.
Gold Is More Stable
In contrast to platinum, the demand for gold tends to be more stable. Jewelry, electronics and medicine are three of the most common uses of gold, and these sectors are less susceptible to economic fluctuations. As a general rule, gold appreciates when the economy is in a slump.
However, platinum's value is intrinsically linked to industry, particularly catalytic converter manufacture. When the car industry slows down due to a recession, platinum's value falls due to reduced demand.
Platinum's Price Fluctuates More
The price of platinum fluctuates more than that of gold for similar reasons. Price variations are seen as a result of changes in demand. While platinum may be worth more than gold, its price is volatile.
However, gold's value has lately surpassed that of platinum. The most astute investors use the gaps in price between the two metals to decipher market patterns. This price difference is frequently shown as a ratio. Because of this, if the ratio is more than one, platinum is cheaper than gold. However, platinum will cost more than gold if the ratio is lower than one.
Gold Is Easier to Mine in More Places
Gold can be found in nearly every region of the planet, and governments actively mine it. Gold's near-surface placement makes it a relatively easy commodity to extract. The rare metal platinum is mostly mined in its only native country of South Africa.
According to some experts, platinum is more abundant than gold in the ground, but it is far more diffuse and difficult to locate. However, other experts dispute this, stating that platinum is, in fact, 30 times rarer than gold. Platinum is far more difficult to mine than gold, which is why gold is used more frequently and has more practical applications.
Gold Is More Desirable as A Store of Value
Platinum's price is linked to demand. In the absence of demand, its market value will drop according to the laws of supply and demand. By contrast, gold's price is entirely independent of these two factors. Because of this, gold retains its value even when supply becomes limited and demand drops.
While this has only been true for a short time, the gold-to-platinum ratio has slowly risen from 2011 until now. This suggests that the price of gold will increase over the long term.
How Do You Invest in Platinum and Gold?
The most direct route to investing in gold or platinum is purchasing physical bullion. "bullion" refers to enormous quantities of platinum, gold or other precious metals in the form of coins, whereas "bullion" refers specifically to coins. Coin dealers, stock brokers, precious metals traders and banks sell bullion.
Platinum and gold coins are among the most sought-after among collectors. In addition to their monetary value, these coins might be valuable for their historical or artistic significance.
Gold and platinum bullion can be invested through stocks, mutual funds and exchange-traded funds (ETFs) if you choose not to keep the metals physically. The extra liquidity they offer is a nice bonus, and they are not vulnerable to the risks associated with storing other assets.
One of the best ways to invest in precious metals is through an IRA (individual retirement account). The account is a tax-deferred retirement savings plan, which means that your contributions will be deductible from your taxable income, and you will not be taxed when you withdraw your money if you meet age and income requirements.
If you decide to go with a precious metal IRA, the first step is finding a reliable precious metal provider. Once you've done that, you can transfer your current IRA to their company, open a new account and start making precious metal investments. You may consider different options and places to buy precious metals before deciding.
Recommended Precious Metal Companies
Here are the top five companies we recommend for investing in precious metals.
If you want the most fantastic IRA service, Goldco is a great option to explore. The organization has been around since 2006 and has built up a good name in the gold investing market. The Better Business Bureau has awarded them an A+, the Business Consumer Alliance has awarded them their highest possible grade, and they have received several glowing testimonials from satisfied clients.
People can start opening an IRA with Goldco or transferring an existing account by filling out a short application form on the company's website. You'll only need to choose your financing method, and a Goldco staff person will help you move your money into your new account. The company also offers an online account management service that you can use to access your account and make investments from home.
Augusta Precious Metals is another excellent choice for both precious metal investors and current IRA holders to explore. The company has been in business for over two decades and has also spent some time on the prestigious Inc. 5000 list of fastest-growing private companies. The company's website presents a clean, easy-to-use interface allowing users to log on and make investments whenever possible.
Augusta Precious Metals doesn't require you to open a physical account – you can buy and sell precious metals online. The company offers only golden eagles, American platinum eagles, American silver eagles, British gold sovereigns and British platinum sovereigns. It also provides various IRA packages, including Roth IRAs, traditional IRAs and 401(k) plans.
Since it was founded in 2015, American Hartford Gold has quickly become one of the most trusted companies in the precious metal IRA market. The company was even named one of Inc.'s fastest-growing private companies in America five times. It offers a wide range of products, including Buffalo gold coins and South African Krugerrands, and also allows clients to invest in platinum.
American Hartford allows customers to purchase precious metals online or call or email the firm if they have any questions. The company has a BBB rating of A+, which makes it one of the most trusted companies in the gold IRA market. American Hartford charges fees to fund or transfer an IRA, offering a ten percent fee discount and a risk-free treasure hunt for new customers.
#4. Birch Gold Group
Birch Gold Group is one of the fastest-growing precious metals IRA providers that have made a name for itself in the industry. The company was founded in 2003 and has become one of America's most trusted gold IRA providers. The company offers a wide range of options, including American gold eagles and Canadian maple leaf coins.
The firm also lends itself well to investors interested in investing and storing their precious metals. They have a BBB bond rating of A+ and have been named one of Inc.'s Fastest Growing Private Companies in America many times. The service fees and postage costs are affordable, and the company even offers a ten percent discount to new customers.
#5. Noble Gold
Noble Gold has been around since 2016 and quickly gained a reputation as a trustworthy precious metals’ provider. The company offers American gold eagles, American platinum eagles and American silver eagles for sale, along with many other precious metals that fall under bullion coins.
The firm works with over 300 banks and credit unions across America to provide its services to investors. The company has a BBB rating of A+ and has been on Inc.'s Fastest Growing Private Companies in America list more than once. Noble Gold offers a wide range of precious metals, affordable prices and affordable shipping charges.
Opening an IRA requires you to fill out a few forms and take some simple steps. By choosing the right company to do business with, you can have a valuable place to invest your money and begin receiving the benefits of precious metals ownership.
Investing in precious metals may be beneficial. When stock markets crash or governments fail, many seek safety in alternative or physical assets. One possibility is to use precious metals like gold. Platinum is more sensitive to price reductions since it is more volatile than alternative options. On the other hand, gold is relatively stable and might be an excellent inflation hedge in the long run.
There are many different providers of precious metal IRAs out there, and the process of choosing one is a challenging one. It's essential to do some research and make sure you only use our recommended reputable companies with a strong commitment to customer service.